Robeco: EZB mit Anleihekäufen bis 2019?

Main market events

European bond markets rallied this week, recovering half of the ground lost after thedisappointing ECB meeting. Peripheral bonds kept pace with Bunds, only short-dated bondsunderperformed a bit. Italian bonds have returned 5% this year, Portuguese bonds 4.1%, Spanishbonds 2.4% and Irish bonds 1.9%.

ECB

Draghi tried to change the perception that the ECB delivered only marginal additional stimulus atits December meeting. In a speech in New York last weekend he claimed that the new measures–including reinvestment of maturing bonds- will lead to EUR 680bn of additional bond buying by2019. Apparently he expects the ECB to keep buying bonds at least until then.

Portugal

The government passed last-minute measures to push the 2015 budget deficit just below 3%.The draft 2016 budget will be submitted early next year. Finance Minister Centeno assuredEurogroup head Dijsselbloem that Portugal will respect the Eurozone’s fiscal rules, although theSocialists envisage a more gradual decline of the deficit than previously agreed with Brussels.

Spain

One week ahead of the national elections, the ruling Partido Popular leads the polls with circa28% of the votes. Ciudadanos has come very close to the Socialists, with both polling on average20% to 21% of the votes. There is no sign of electoral uncertainty in the Spanish bond market.

Ireland

Economic growth remains strong, with third-quarter GDP growth of 7% year-on-year. S&Paffirmed its A+ rating for Ireland, expecting real growth of 4% on average over 2012-2018.

Robeco Euro Government Bonds

We continue to see the ECB’s QE program, the generally supportive stance of EU policy makerstowards the periphery and the improvement in growth as positives for peripheral debt. But to alarge extent these positives are already reflected in current valuations. We therefore prefer tofocus on relative differences between countries in the periphery.

We took profit on part of our overweight position in Portugal versus Italy and Spain this week asmarkets have recovered after the formation of a government.

The fund has overweight positions in Portugal and Ireland and underweight positions in Spanishand Italian bonds. Portugal benefits disproportionately from QE and strong economic growth israpidly improving the Irish debt metrics. Peripheral bonds make up 25% of the fund. Year-to-datethe fund’s absolute return is 1.95%.

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